I got to thinking about yesterday’s post on humanity in part due to a discussion of global banking. Global, universal banking was the mantra of the 2000s and HSBC, Citi, Bank of America, BNP Paribas, Deutsche and more were all jumping on the bandwagon. After the global financial crisis, they all jumped off it again, and most global, universal banks ambitions are now clipped back to purely being able to support their global corporate clients’ needs. It’s not universal, just commercial.
As this has happened, we have seen a counter-trend occurring, as the maturing FinTech specialists branch out to create global monoline services in platforms. Klarna, SoFi, Stripe, PayPal, ANT, WeChat and more are branching out to deploy their services in the marketplace of apps, APIs and analytics and succeeding to a greater or lesser extent. So, the universal model of a bank doing 1000 things averagely around the world is replaced by 1000 companies doing 1000 specialist things brilliantly, thanks to the deployment of technology for financial processing. They are also succeeding.
In fact, many of these early start-ups are now maturing into global players and looking at getting banking licences to paly across more of the spectrum of finance. Certainly, we’ve seen that with Klarna, SoFi and Zopa, and I expect there to be more, purely because linking credit with debit or making payments as a specialist service, avoids attacking the core function of a value store, and we need global value stores.
This is obvious when you look at the fledgling hiccups of bitcoin. There are few trusted value stores of bitcoin and the ones that exist are regulated. Many others – the most recent being bithumb and arbX – are building on the MtGox issue. They are not trusted value stores but just trading exchanges. You need to get your bitcoin off the exchange and into a trusted value store – digital or regulated – to really be able to believe in this currency.
The libertarians tell me this is all democratised and the democracy will regulate the currency. That’s all well and good, until you lose your store of value, and have no comeback or say on what happened. What do you do then? Tough.
But I was equally struck by a banker who laughs at the idea of a global currency that circumvents banks. Banks will always be needed as your value store, he said. He thinks bitcoin is stupid and the kids will learn to grow up one day, and put their bitcoins in banks.
I glared at the guy, as I thought how arrogant and complacent are you? Of course, kids will find ways to democratise their value stores. They will also find ways to get around the banks, and they already are.
For example, if the specialist FinTech processors I’ve mentioned could combine forces with each other and then with other global platform players like Facebook, Amazon, Google, Uber, Airbnb, Snapchat and company, what would they achieve? Imagine a marketplace of global players aligning forces where they work together in partnership. This could offer global financial integration into our social and consumer lives through APIs. In fact, it already is. The fact that we can integrate our payment cards and bank accounts into PayPal, Uber and Facebook has already changed that game.
So, I am imagining the future world where full banking licenced global players from Ant Financial to Stripe work in partnership with Facebook, Uber and co, to give us a world where we still need banking but we don’t need banks. Some may think that is fanciful but, give it ten years ….
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...